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Chapter 15 Bankruptcy

Easy to Learn Notable Cases

Easy to Learn Notable Cases

The aim of most voluntary bankruptcy cases, whether they are filed by individual applicants or corporate debtors, is to restructure financial obligations so that petitioners may be able to appease creditors and to place a halt on collection actions while engaging in repayment plans through bankruptcy court. 
In the example of American corporations vying for cross-border insolvency protections, a particularly controversial bankruptcy case sprung up in 2007 and presaged the widespread failures of banks and financial institutions in the United States that affected the global economy.
Bear Stearns, like Fannie Mae, Freddie Mac, Lehman Brothers and other organizations, a symbol of the recession, filed for Chapter 15 in the Cayman Islands, where it operated two hedge funds (a type of high-risk investment fund). Critics of the move cited the notion that liquidation proceedings are more lenient towards businesses in the Cayman Islands, and thus, it was implied by some that Bear Stearns executives were running from their problems in the United States and engaging in a bit of subterfuge from trying to legally distance themselves from the funds they ran.
Defenders of the move, meanwhile, insisted this move was within Bear Stearns’ legal bounds, despite the assertion by critics that the move was unethical. Regardless of what side people took, the concern that this might lead to future similar bankruptcy cases was a palpable one.
In terms of a rather recent Chapter 15 bankruptcy case, and one moving in the opposite direction geographically, Thomson SA filed for Chapter 15 bankruptcy in late 2009. Thomson SA, now known as Technicolor SA, was a company primarily based in France but had established divisions in the United States and provided electronics products and other related services to high-profile consumers in America.
As its divisions in the U.S. generated close to half of its total revenue, Thomson was keen to use the safe haven of Chapter 15 as a shield from American creditors looking to collect, much in the way it and other French corporations use the doctrine of sauvegarde (more analogous to Chapter 11). 
As noted, the banking crisis of the late 2000s was not merely confined to the United States. In fact, the impact on creditors was felt worldwide, especially with prominent financial institutions. Iceland, for one, experienced a complete banking meltdown as a country in 2008 with its three largest banks collapsing in the wake of this financial disaster.
Kaupthing, the biggest of all Iceland banks, like Thomson SA, initiated a Chapter 15 bankruptcy case to try to save its American assets from American creditors. Eventually, the Icelandic Federal Government took over, and to date, Kaupthing – coincidentally also known now by the different name, Arion Banki – remains a state-run organization in “moratorium status.”

Read This Before Filing For Chapter 15

Read This Before Filing For Chapter 15

The vast majority of business-oriented cases heard under provisions of United States bankruptcy law today are under Chapter 7 and Chapter 11 of the U.S. Bankruptcy Code. Chapter 15 of Title 11 of the United States Code, like many pieces of Federal legislation addressing inter-country policies, draws influence from conventions of international law. Chapter 15 bankruptcy owes a large debt to the United Nations Commission on International Trade Law (UNCITRAL).
Seeing as Chapter 15 deals with international matters, though, there must be mutual recognition between countries involved in any such negotiation. Thus, using UNCITRAL as a reference point, foreign nations invoked in a Chapter 15 bankruptcy case must have their own internal legislation similar to Chapter 15 on the books, and at the same time, must recognize the authority of the legal language of Chapter 15 bankruptcy law. In other words, though a written accord between two nations may not be necessary, there is an implicit contract at works in Chapter 15 hearings.
Chapter 15 bankruptcy law employs some very specific terminology as it is written. Of course, the terms “debtor” and “trustee” are well-known to students of bankruptcy law, but other distinctions like “foreign main proceedings” (cases in foreign courts where a corporation does the majority of its business) versus “foreign non-main proceedings” (pending cases in non-main countries where that entity has established assets) beckon careful study by potential applicants. In fact, in trying to get a hold on Chapter 15 law, one may need to understand multiple sets of terms used across jurisdictions.

Learn about Chapter 15 Bankruptcy Purpose

Learn about Chapter 15 Bankruptcy Purpose

It has been said that math is a universal language. Words and alphabets may be different from country to country, but numbers are a constant no matter where on Earth you go. With regards to bankruptcy laws, these too are subject to change just between American states, never mind between independent nations. However, debt is measured in numerical figures, and provided the right exchange rates are calculated, this should translate no matter what.
The role of a uniform bankruptcy law – or at least one modeled on a uniform law – then must be to reconcile the inconsistencies in bankruptcy laws across jurisdictions with the literal data that is the sum of debts to creditors. In terms of American bankruptcy laws, Chapter 15 bankruptcy is this negotiator. The following are considerations of the purposes of Chapter 15 bankruptcy:     
As the most critical parties in these matters are those that are directly impacted by bankruptcy laws, namely the debtors and creditors, this idea of community is all for naught if agreements are made that do not represent those groups’ best interests. Another clear objective of Chapter 15 is that, in liquidation cases bankruptcy filers will get the maximum possible value for their assets. In reorganization cases, the objective is that they are able to salvage their businesses. Regarding lenders, though, they too should be given certain safeguards, especially their representation in court.         
As the United Nations Commission on International Trade Law (UNCITRAL) is a law that deals more broadly with “international trade,” it makes sense that Chapter 15 law is not only concerned so narrowly with bankruptcy laws. Overall, this chapter strives to uphold “greater legal certainty for trade and investment” across borders.

Chapter 15 Bankruptcy

Chapter 15 Bankruptcy

What is a Chapter 15 Bankruptcy?
Formally enacted through the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Chapter 15 Bankruptcy is the United States domestic adoption of the Model Law regarding Cross-Border Insolvency. In 1997, the act was promulgated by the United Nations Commission on International Trade Law to replace section 304 of Bankruptcy Code. This provision, which is interpreted uniformly by developed nations, adopts a law to promote a coordinated legal regime for cross-border insolvency issues.
 
The primary purpose of Chapter 15 Bankruptcy is to provide an effective means for dealing with insolvency cases that involve assets, debtors, claimants and parties of interest involving multiple countries. 
General Purpose of a Chapter 15 Bankruptcy Filing:
A Chapter 15 bankruptcy filing is comprehended through five objectives which are tangibly specified in the statute:
1. A Chapter 15 Bankruptcy filing aims to promote uniform cooperation between the U.S. court system and parties of interest with the courts and other authorities of foreign countries who are involved in any type of cross-border insolvency case.
2. A Chapter 15 Bankruptcy filing creates greater legal certainties for investment and trade
3. A Chapter 15 Bankruptcy filing promotes and provides for the fair and effective administration of cross-border insolvencies to protect the interests of creditors and other associated entities—including the debtor involves.
4. A Chapter 15 Bankruptcy filing facilitates the rescue of financially distressed business entities; the initiative protects investment and preserves employment. 
Typically, a Chapter 15 Bankruptcy filing is an ancillary measure to the primary proceeding brought in another nation—typically the debtor’s home country. As suitable alternatives, the creditor or debtor may file a Chapter 7 or Chapter 11 bankruptcy case in the U.S. if the assets in the U.S. are deemed too complex to merit a singular domestic bankruptcy filing. 

Particular Surrounding a Chapter 15 Bankruptcy Filing:
Ancillary cases may be commenced through a Chapter 15 filing by foreign representatives—these individuals will file the case through a petition for recognition of a “foreign proceeding.”
A Chapter 15 filing enables the foreign rep the right of access to the United States court system; however, the petition must be filed with accompanied documents definitively showing the existence of the proceeding and the authority of the foreign rep. 
After a notice and the hearing, the court is then authorized to issue and order that recognizes the foreign proceeding. Immediately upon recognition, the automatic stay of the Bankruptcy Code is enacted within the U.S. Through this process, a Chapter 15 Bankruptcy filing operates as the vehicle for a foreign rep’s entry into the United States Court system. Once recognized, the foreign rep may seek additional relief from the courts to file a full-fledged bankruptcy case. 
A Chapter 15 bankruptcy filing awards a foreign creditor with the right to participate in American bankruptcy cases while prohibiting discrimination against all foreign creditors associated with the case. One of the primary goals of the filing is to promote communication and cooperation between the American court system and all parties of interest with foreign courts in cross-border suits. This goal is achieved by demanding that the parties directly communicate with one another.


While Chapter 15 proceedings are by no means unimportant, in most instances, they are “ancillary” to existing proceedings in another court.
In all likelihood, a debtor’s home country will be the jurisdiction in which the main bankruptcy hearing is held, although the preliminary hearing for a Chapter 15 case in a U.S. bankruptcy court may result in the assessment of one particular bit of bankruptcy information: that of whether or not the foreign court really is the site of a “main proceeding.” Then again, normal bankruptcy guidelines may indeed come into play upon the request of either the debtor or a creditor to launch a Chapter 7 or Chapter 11 bankruptcy case.         
In Chapter 15 proceedings, a good deal of bankruptcy information and leeway is bestowed upon foreign officers of the court to act on a debtor’s behalf and be involved. First of all, “foreign representatives” given the authority to operate on a debtor’s behalf may use a U.S. bankruptcy court to officially recognize a hearing in a court abroad as a legally binding hearing by American Federal law. Other functions these parties may perform through U.S. courts include securing debt relief for applicants, serving as a party of interest, and even temporarily running a debtor’s business in their stead.
At the same time, there are some bankruptcy guidelines native to Chapter 15 proceedings. Specifically, special protections are put in place for creditors to assure they are fairly treated. Part of this fair treatment is the idea that foreign creditors may also be represented in U.S. courts. Moreover, under Chapter 15 law, their nationality should have no bearing on whether or not they stand to recoup from businesses to whom they lent funds. Only the nature of their claims should decide these affairs.

What You Need to Know About the Filing Process and Jurisdictional Concerns

What You Need to Know About the Filing Process and Jurisdictional Concerns

The major purpose of Chapter 15 in regulating
international bankruptcy filings is to bring a semblance of
standardization. Without some form of all-encompassing law on cross-border
insolvency cases, bankruptcy filing would be needlessly complex. While
this doesn’t imply Chapter 15 bankruptcy filings are simple, the laws
surrounding them are perhaps surprisingly uncomplicated considering the level
of agreement needed between authorities of courts in separate jurisdictions.
Then again, most of these statutes of Chapter 15 bankruptcy filing contain
a tacit sense of agreement between countries.

 

Chapter 15 bankruptcy filings are
unique with respect to working on an international basis as opposed to the
other chapters in the Bankruptcy Code
. However, in terms of the officers that populate courts in different
jurisdictions, they realistically are comparable. The role of the foreign
representative, meanwhile, brings Chapter 15 bankruptcy filing back
to the realm of distinction.

 

For bankruptcy proceedings in other countries
to be recognized by American courts, the first thing
appointed foreign representatives must do is file the
aptly-named petition for recognition, including evidence that they were
specifically appointed for this purpose and a certificate from a foreign court
that such proceedings have indeed begun. The U.S. courts must also weigh in on
whether these are main or non-main proceedings (whether or not they are heard
in a place where the majority of debtors’ business is conducted).

         

Though not necessarily bound by paperwork as
“bankruptcy filings” might be expected to, the communication between
all courts involved is also part of the bankruptcy filing process. In some
instances, this might be as simple as appointing an individual as an examiner,
foreign representative, or trustee
.

 

With regard to concurrent Chapter 15
bankruptcy filings, multiple court cases may only be realized for debtors who
have assets in the United States subject to liquidation or reorganization.
Regardless of whether this American case comes first or second, any Chapter
15 bankruptcy filing that follows these conditions must adhere to
U.S. standards on the issuance of debt relief. It should be noted, though, that
multiple foreign bankruptcy filings may be concurrently heard in
foreign courts under Chapter 15
. In this case, application of relief must conform to the
standards of the main proceeding. 

Learn All About Cross Border Insolvency

Learn All About Cross Border Insolvency

As is the norm with conventions governing international law, for them to be effective, they must be put in a form that individual countries will add to their own constitutions. Chapter 15 is the United States’ answer to model, universal laws that preceded its establishment by almost four decades.
Nonetheless, the codification of Chapter 15 itself into law may serve as a model for other nations that still have not made the main agendas of divisions of the United Nations regarding global commerce. In their own ways, Canada, Japan, and Mexico are among the more prominent nations that have created Chapter 15-like policies, and evidence suggests more are on the way.
Background
Though Chapter 7 and Chapter 11 bankruptcy proceedings may well be used in cases of international insolvency, they are arguably better suited for domestic affairs as they only mediate discrepancies of debts and laws on a national level. Meanwhile, when a company’s holdings and creditors lie outside the country, navigating the proverbial waters of bankruptcy law between nations may be decidedly tricky. This dilemma explains the inclusion of Chapter 15 cross-border bankruptcy in  Title 11 of the United States Code.
The provisions of Chapter 15 are directly patterned after the larger aims of the United Nations Commission on International Trade Law (UNICTRAL). Like UNCITRAL, it is meant to be emblematic of the need for a good rapport and cooperation among independent lands in matters of inter-country commerce, and obviously extends these notions to bankruptcy as decided by the courts. 
Through all of the above, the efficiency and effectiveness of Chapter 15 bankruptcy law is highly dependent on mutual understanding between nations. Of course, there must be a literal understanding by all interested parties in a case, and as such, terms like “foreign main proceeding” employed by the U.S. government must not get lost in translation.
More than this, though, if a foreign nation that tries a debtor in one of its courts has neither acceded to the terms of UNCITRAL nor developed a Chapter 15-like law of its own, any consensus runs the risk of being severely impaired, as does the ability of foreign officers to use precepts American bankruptcy courts for their interests, whatever they may be. Moreover, any decisions made by courts/plans crafted by debtors must be adhered to by the debtors themselves, creditors here and abroad, and foreign ministers alike, regardless of a separate treaty.